Category: Constitutional KIP - Process
Title: Burn-Bolster Mechanism
Abstract:
This proposal outlines the implementation of the Burn-Bolster Mechanism within the constitutional framework of KARRATco, affecting the use of the $KARRAT Token. The Burn-Bolster Mechanism aims to enhance the token’s scarcity and sustainability by redirecting a portion of the proceeds from the initial sale or minting of any on-chain asset to the existing KARRATco Treasury and implementing an effective burn for another portion of the tokens. Should the Karrat Foundation and/or KARRATco launch a chain where $KARRAT is the native gas token, the types of transactions to work in tandem with the Burn-Bolster Mechanism can be expanded upon, should the KARRATco agree to this, based on future proposals.
Key Terms:
Burn-Bolster: A mechanism where a portion of $KARRAT Tokens from each transaction is effectively burned (irreversibly sent to a burn address), and another portion is used to refill the KARRATco Treasury for future governance decisions.
KARRATco Treasury: The existing wallet where community-governed funds of KARRATco are stored.
Factory Contracts: Blockchain contracts that act as “factories”, automating the process of deploying new smart contracts with predefined templates or structures. This allows developers to efficiently create standardized contracts with consistent functionality. Factory contracts streamline the deployment process, ensuring uniformity while enabling customization options, making them ideal for scalable applications that require numerous contract deployments.
Motivation:
The motivation for the Burn-Bolster Mechanism is to:
Reduce Token Supply: By effectively burning tokens, we aim to make $KARRAT deflationary.
Ensure long-term sustainability: By refilling the Treasury, we make sure the DAO can keep operating in a sustainable way.
Rationale:
Token Scarcity: Effectively burning tokens helps to counter inflation within the $KARRAT ecosystem due to unlocks.
Community Trust and Participation: Saving tokens in the Treasury for community-governed use fosters trust and active participation in network governance.
Specifications:
Token Distribution from Each Transaction:
Burn: A minimum of 1% of each transaction’s $KARRAT tokens will be permanently removed from circulation by effectively burning them. The creator of the collection, asset or product can adjust this amount, but it can never be lower than 1% of each transaction.
Bolster: A minimum of 1% of each transaction’s $KARRAT tokens will be used to bolster the existing KARRATco Treasury. The creator of the collection, asset or product can adjust this amount, but it can never be lower than 1% of each transaction
Mechanism Operation:
The Burn-Bolster mechanism will be executed through factory contracts, allowing for customization in how much of each transaction is effectively burned and how much is used to bolster the DAO treasury, with the above percentages as minimums.
Burn Process:
Tokens will be sent to a designated burn address where they cannot be recovered or spent, effectively removing them from circulation. This address is: 0x0000000000000000000000000000000000000000
Refill Process:
Tokens will be sent to the KARRATco timelock address from where they can be used again for future governance decisions. This address is: 0x5Fe284B1D135a901DF3D9798E70E15E4F0056c99
Steps to Implement:
Development and Audit: Write and audit the new Burn-Bolster smart contracts.
Launch: Upon approval, deploy the Burn-Bolster contracts.
Integration: Integrate these contracts into existing or new asset minting processes.
Overall Costs:
Smart Contract Development: Since the KARRATco does not govern the foundation treasury, this is a request that the foundation continues to fund this proposal like originally suggested by the Foundation themselves.
Auditing: Also to be covered by the Foundations budget.
Conclusion:
This KIP, if passed, will introduce a sustainable model for managing $KARRAT Token supply through effectively burning supply and bolstering the existing KARRATco Treasury for further governance and ensuring the network’s long-term health and community engagement.